SC Quashes SEBI Penalty on Mukesh Ambani, Battle Continues Even After 30 Years

The Supreme Court has dismissed a plea by the by the Securities and Exchange Board of India (SEBI) to impose a Rs 25 crore penalty against Mukesh Ambani, Chairman and Managing Director of Reliance Industries Ltd (RIL), on Monday in a 2007 case related to alleged manipulative trades in shares of the erstwhile Reliance Petroleum (RPL), a listed subsidiary of RIL that was merged into RIL in the year 2009.

The market regulator had challenged a Securities Appellate Tribunal’s ruling that had quashed the penalties totalling Rs 70 crore on RIL, Ambani, Navi Mumbai Mumbai Special Economic Zone (SEZ) and Mumbai SEZ.

“What erroneous interpretation you found with Sec 15 (h). 30 yrs of litigation…this is a long time.. no question of law is involved,” the court said.

The bench of Justices JB Pardiwala and R Mahadevan also criticised SEBI for the inordinate delay in investigating the issue, which originated in 1994, as well as in adjudicating on it and pursuing the ensuing litigation.

However, the court agreed to hear SEBI’s appeal challenging the Securities Appellate Tribunal’s (SAT) decision granting relief to RIL itself on December 2 but will not hold Ambani accountable personally for the alleged scam.

READ: Swiggy IPO Opens for Bidding Today, Investor Interest Remains Tepid

A Three-Decade-Long Showdown

In January 1994, RIL allocated six crore rupees Non-Convertible Secured Redeemable Debentures (NCDs) worth Rs 50 each to 34 entities as well as three crore warrants. Each warrant allowed holders to receive two equity shares of RIL upon paying Rs 150 each within six years. These warrants were tradable and disclosed to the Stock Exchange in 1994. Later in 2000, warrant holders received 12 crore equity shares from RIL Board under the term that each warrant holder to receive four shares upon paying Rs 75 each.

Later it was disclosed by Reliance that this allotment resulted in 6.83 per cent increase in the shareholding of the promoters and their associates.

While SEBI did not object to this disclosure that time, later in 2002, it received a complaint alleging violations of SEBI regulations by RIL's promoters and issued a show-cause notice in 2011.

In the same year, RIL and its promoter filed a consent application to settle the matter, which was rejected by SEBI in 2020. In 2021, the case was revisited, and the market regulator penalised Ambani and two other entities, alleging manipulation of RPL shares during the sale.

Ultimately in December 2023, SAT overturned SEBI’s order imposing penalties on Ambani and RIL. Citing the records of board meeting showing the trades were carried out by two other individuals without Ambani’s knowledge, SAT ruled that Ambani could not be held accountable for all corporate breaches.